Raising Cannabis Capital 0128: Root Sciences

The cannabis industry's explosive growth requires that extraction and distillation equipment production capacity increases.  Root Science is the United States largest distributor of cannabis distillation equipment.  Eric Croft explains to Dan Humiston how extraction and distillation equipment and how they are keeping up with the demand.   He also discusses their current capital raises and how investors can participate in their growth.

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Dan Humiston:
Today's show is brought to you by a new podcast produced by MJBulls Media called the Deadhead Cannabis Show. It combines great past and present Cannabis music with a deep dive into the social ramification of legalization of cannabis. Download the Deadhead Cannabis show each week from MJ MJBulls.com. I tunes are Spotify and join Cannabis CPA Jim Marti and Cannabis attorney Larry Michkin for classic stories from there. Over 150 Grateful Dead concerts and awesome insight into the future of the Cannabis industry.

Eric Croft:
We just raised a series, a gross round that we're just closing now about six million dollars. The use of proceeds on that are mostly going to our manufacturers to help free up capacity, if you will, to put in deposits on this larger equipment, because the lead times of some of this larger equipment can be fairly long. Eight to 10 months.

Dan Humiston:
From MJBulls Media. It's the Raising Cannabis Capital show. I'm Dan Humiston, and on today's show how this Washington state Cannabis equipment distributor is expanding their company and their equipment to keep pace with the industry.

Dan Humiston:
Today, a Raising Cannabis Capital, we are joined by aircraft from Root Science. Eric, welcome to the show.

Eric Croft:
Thank you. Dan, I appreciate you having me.

Dan Humiston:
I'm glad you're on the show because it's a lot of questions I have about about manufacturing equipment.

Eric Croft:
We are actually a distributor. All of our equipment is made in Germany and then we bring it to the U.S. and do the exclusive distribution in the Cannabis and Hemp space.

Dan Humiston:
I see. So you have the exclusive distribution for the United States globally in the Cannabis.

Dan Humiston:
Not bad to have a global. That's not such a big deal.

Well, I'm gonna have you take a step back. I'd like to get started by talking about extraction. Just give us an overview of what extraction is, how it's done, what it's done for sure.

Eric Croft:
Just to kind of take a step back. We are a licensed producer processor here in Washington State, which is kind of how route sciences was formed. So we do have quite a bit of experience operating in hydrocarbon and CO2 in cryo ethanol. We've pretty much run all three of the major types of extraction methods here at our facility.

Dan Humiston:
Have you been doing that since the law passed?

Eric Croft:
Yeah. Yes. Since the final two law passed here in 2004. We originally started out as a producer processor. We realized there was a lot of equipment that was needed for that. And that's how science is was spun off and signed up the best of breed as far as extraction distillation equipment. Now we're working on other verticals that go along with post-processing.

Dan Humiston:
I don't mean to interrupt you, but I want to make sure it's right. Yeah. So let's jump right into it. Talk about extraction.

Eric Croft:
Sure. People have been doing it for a while on a large scale. It's evolved tremendously. And typically there's three different types. There's use of CO2. There is like hydrocarbon, which is your propane, butane. And then there's your ethanol extraction, which is what we focus on. Using extraction at about a negative 50 degrees Celsius is what we've come up with as the best for scalable operations, which, you know, with the passage of the farm bill, everybody is now producing massive quantities of Hemp, which is what we're seeing in the industry with equipment getting larger and larger. But basically what we're doing as far as cryo ethanol is taking the plant matter, putting it in a very short soak time out again about a negative 50 C, which allows you to bypass the winter ization and the filtration and go right to the D carb and solvent recovery, which what our equipment does all in one skit.

Dan Humiston:
I see. I so. So some of your equipment is specifically focused on the extraction side, but then you drill down further and you get to a point where it's called distillation.

Eric Croft:
Yes. So the extraction method will produce what's called a crude oil, usually about 65 to 70 percent pure cannabinoids with still the other 30, 35 percent is still different. That's lipids, waxes, all outsourcing. So what you do is you take it one step further and you run it through one of our distillation plants. And it's basically just different heats and pressures. The first cut will take off your light molecules, which are your Terrapins, and then you do a second run through it and you target your heavy molecules, which are your cabinets. And what it produces is a distillate. It's anywhere from 95, 98 percent pure cannabinoids. And it looks like six biscuits, honey. Ninety five percent purity. We've had them up to 98, 99 percent just depending on what your input material is. And that's pure cannabinoids. That's mostly THC. But it will have some CBD, CBN, CVG, it'll have whatever your input material is. At that point, you can use it for big cartridges, edibles. You can take it further as far as the post-processing if you'd like, into crystallization or an isolation if you're dealing with CBD, that sort of thing.

Dan Humiston:
We talked about this before we went on. Your machine handles the entire process, so it's on the extraction.

Eric Croft:
Yeah, it's all in line. It takes what used to be about a four or five day extraction process with the winter ization decarbonisation solver recovery. It does it all in one, all in one skid, all in line.

Eric Croft:
We've really kind of standardized the process for extraction and you're the largest my market share fun lifestyle. It's the supplier. That's incredible. That's incredible.

Dan Humiston:
I want to take a quick break to thank all of our Raising Cannabis Capital listeners and to remind you that you can support the show by subscribing to MJ Bell's premium. It's only four dollars and ninety nine cents per month. And you gain access to all previous Raising Cannabis Capital episodes as well as all other MJ bills produced podcast and exclusive content, including companies, investor pitch decks, good MJ Bulls, Dot.com and enter promo code raising to get your first month free.

Dan Humiston:
Talk about root sciences.

Dan Humiston:
What's next for the company? What's the next mountain climb?

Eric Croft:
Sure. Social sciences. Really? We've doubled every year. We'll double again this year. Started out mostly the distillation Mallory and the extraction. We're looking at different verticals. The post extractor post distillation side where again, people are extending the post-processing cycle. It used to just be extractions that it was extraction distillation and now we're seeing different technologies that are coming out that are post distillation that we're looking for. Best of breed manufacturers to bring in to distribute their equipment exclusively in the Cannabis space and grow that way. Another way that we see that the market is definitely trending with the passage of the farm bill is with all of the Hemp producers. Now, the equipment used to be very small. Dealing with the THC side and now it's just getting larger and larger and larger. Some of these plants, two or three stories. Totally. So. Oh, yeah. So instead of a lot of small equipment, we're selling a lot more of the larger capacity systems now.

Dan Humiston:
Well, I mean, that's great news for everybody, but I'm sure it's putting a lot of pressure on you guys to keep up with this kind of growth. Are you raising money for this?

Eric Croft:
We just raised a series, a gross round that we're just closing now, about 6 million dollars. The use of proceeds on that are mostly going to our manufacturers to help free up capacity, if you will, to put in deposits on this larger equipment, because the lead times on some of this larger equipment can be fairly long, eight to 10 months. So we're hoping to kind of reduce some of those lead times by helping them out some additional deposits. We just wrap that up, finalizing all that right now and then we're using that as our growth round. We haven't had to raise money before. We've always been cash flow positive from day one. Kind of a new thing for us. We should be good to go for a bit. And then, you know, after we deploy these funds, what comes next?

Dan Humiston:
Yeah, I guess if the industry keeps going at this pace, you're going to have to keep your eye on this, because a lot of this money, you know, you're just using just to almost like a line of credit here. You need to put the Byzantine equipment. A lot of this has made to order what it is.

Eric Croft:
And a lot of the larger equipment is custom builds, which takes a lot of engineering, long lead times. We've tried to standardize it over the years. Initially, we only had one kind of off the shelf distillery plant. We're up to four different sizes now where we get our manufacturers spruce one and it's kind of a rinse and repeat type thing. But some of the larger ones, the custom builds that some of our larger customers require. They work direct with our manufacturers engineers to get it to where they want. Some of these are so large that they have to build the the building around like crazy. So it's there's there's a lot that goes into the bigger picture.

Dan Humiston:
So this round is closing the next round. You don't know when it's going to be. But if if people are interested in, you know, he's keeping an eye on you and when there's an opportunity, what do they do? How did they follow up with you? Yeah. Yes.

Eric Croft:
So right now we've engaged ready and capital to I. Most of your listeners will know we've used them as our investment bank over the course of the last six or eight months. We'll be continuing to use them going forward. So he's got riper. We'll be handling the next four to six months at least of our work.

Dan Humiston:
Yeah. There's not a lot of investment bankers in Cannabis and Scotts handle. A lot of the companies have been on the show. Exactly.

Eric Croft:
Yeah, but anything as far as the B round or pre IPO round, if that's the direction we go, would be directed toward Scott at this point.

Dan Humiston:
Well, we'll have all of Eric's information. I'll route science information for audience information on the MJBulls Web.

Dan Humiston:
Eric, exciting stuff. This exciting stuff. Thanks for being on the show.

Eric Croft:
It's it's moving fast. I appreciate you having me. This is good.

Dan Humiston:
Promise me you'll be back.

Eric Croft:
Oh, absolutely. Absolutely.

Dan Humiston:
Thanks for listening to Raising Cannabis Capital to learn more about today's guest, to become a guest. Visit our Web site at MJBulls.com. Today's show is produced by MJBulls Media with original music produced in part by Jamie Humiston. I'm Dan Humiston and you've been listening to the Raising Cannabis Capital podcast.

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